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Is Midway Airport privatization deal back in the works?

A Southwest Airlines Boeing 737 waits take off Chicago's Midway Airport as another lands. FILE PHOTO. (AP Photo/Charles Rex Arbogast)

A Southwest Airlines Boeing 737 waits to take off at Chicago's Midway Airport as another lands. FILE PHOTO. (AP Photo/Charles Rex Arbogast)

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Updated: June 9, 2012 8:08AM



Chicago aldermen signed off Monday on Mayor Rahm Emanuel’s plan to refinance $1.5 billion in Midway Airport debt — and got a strong sign that the $2.5 billion Midway privatization that collapsed for lack of financing may yet be cleared for takeoff.

Lois Scott, City Hall’s chief financial officer, told the City Council’s Finance Committee that only $40 million of the Midway bonds would be spent on new projects — for noise mitigation. The rest would refinance existing debt at reduced interest rates, Scott said.

Then, she dropped a giant hint.

“If the administration proceeds to lease the airport, there will be a need for a small refunding issue of approximately $300 million prior to executing the lease….That has to be repaid by January,” she said.

After the vote, Scott was asked why Emanuel continues to pursue a Midway privatization deal he campaigned against.

“We don’t want to turn off anything that could potentially produce a benefit for our taxpayers,” she said. “We’re evaluating whether Midway makes sense for us to pursue. We’ve been directed to study it. Right now, that is as far as we’ve gone…It’s really the decision of City Council and the public as to what the right approach will be.”

When former-Mayor Richard M. Daley left office, he said the 99-year Midway lease was “ready to go” but that he would leave the final decision on the deal to his successor.

Determined to avoid the political furor that followed Daley’s decision to privatize Chicago parking meters, Emanuel campaigned on a promise to permanently ground the Midway deal.

But the city’s decision to seek a pair of extensions from the Federal Aviation Administration — the latest until Dec. 31 — has raised suspicions. So has the background of two key members of Emanuel’s financial team.

Scott co-founded a firm that provided strategic financial advice to state and local governments across the country about privatization deals. And, as a private attorney, city Budget Director Alex Holt advised the group that was poised to acquire Midway before the deal fell apart.

The 2009 collapse of the Midway deal left Chicago taxpayers with a $126 million down payment but no apparent way to shore up underfunded city pensions that threaten to become a financial albatross for future generations of property owners.

The 99-year lease would have allowed Midway Investment and Development Company LLC to pocket airport revenues that topped $130 million in 2006, including parking, concessions and passenger facility charges.

An estimated $1.15 billion of the city’s proceeds would have been used to pay off Midway Airport debt. The deal also included: $225 million for police and fire protection; $126 million for soundproofing and Midway capital projects already under way and $19 million for transaction fees and legal expenses.

State law required 90 percent of the $1 billion profit to be used to bankroll city infrastructure projects and shore up under-funded city employee pension funds.

That left $100 million to be spent at the city’s discretion.

The parade of pinstripe patronage tied to the $1.5 billion in Midway bonds will be led by senior manager JP Morgan. Cabrera Capital Markets, led by Chicago Plan Commission Chairman Martin Cabrera, and Bank of America/ Merill Lynch will serve as co-senior manager. Mayer Brown will serve as bond counsel, with Sanchez & Daniels serving as co-counsel.

The Finance Committee also approved $600 million in bonds to finance the first two years of Emanuel’s plan to rebuild Chicago’s aging water and sewer system. The team managing that debt is comprised entirely of minorities, women and disabled veterans.



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